Acting as an Expert Witness

A forensic accountant expert is a person who has specialized knowledge in the area based on the person’s training, study or experience.  An expert witness may be expected, or required, to give an opinion and draw conclusions based on the facts.

When acting as a forensic witness, high standards of performance are required.  It is imperative that an expert witness ensure they have collected and assessed all relevant facts and information from the lawyer and client.  Particularly when dealing with the lawyer and client, great care should be taken to avoid the possibility of being influenced to provide an opinion which is more favorable to the client than can be justified on the known facts.  The expert witness’ role is to serve the court and therefore must ensure the truth is unveiled.  If by some chance the expert witness is dishonest, it will undermine the experts’ credibility and diminish the value of their opinion (Hoffman, Finney, Cox & Cooper, 2013).

In order to avoid being discredited in court through showing partisan, the forensic accounting expert should ensure that all facts have been considered and analysed, and report the truth of the case.

References

Hoffman, R., Finney, W., Cox, P. & Cooper, K. (2013).  The Accountant as an Expert Witness: A basic guide to forensic accounting (2^nd ed.).  CCH Australia Limited.

Management of Vicarious Liability Risk

When considering the broad range of crimes that can be committed in the business world that fall under the banner of fraud, bribery and corruption, the list is quite lengthy.  We are able to categorise business crime into four major categories of business crime, as follows (Latimer, 2012, p. 96).

Category	Examples
White-collar crime	Embezzlement Insider trading Money laundering
Organised crime	Illegal drugs Illegal services
Computer crime	Unauthorised access Unauthorised impairment of data Internet fraud
Regulatory offences	Breaches of: The Corporations Act 2001 (Cth) Environmental lax; and Workplace laws

A company is deemed to be liable for the crime if the plaintiff’s actions are considered to be within the course of employment.  In Australia, a vicarious liability can arise under contract law, tort law, criminal law, and any other statutes.  The existence of vicarious liability is justified by the fact that it encourages good management practices.  In order to manager the risk of vicarious liability, managers and directors should take more care when recruiting.  Specifically, they need to consider whether a person is capable, qualified and of a suitable temperament for the post (Lockwood, 2011, p. 150).

References

Latimer, P.  (2012).  Australian Business Law (31^st ed.).  CCH Australia Limited.

Lockwood, G. (2011).  The widening of vicarious liability: Implications for employers. International Journal of Law and Management, 53(2), 149-164. DOI: 10.1108/17542431111119414

Regulatory Environment

Just as the risk of fraud increases, so does the necessity for forensic accountants.  The Queensland Health $16 million and ING $50 million fraud cases demonstrate the requirement for proactive and reactive forensic accounting services (Van Akkeren, Buckby & MacKenzie, 2013).

Forensic accountants are required to assist the courts, solicitors and clients to understand complex financial and accounting issues by presenting information in a manner that all users will understand (Shields, 2010, para. 1).  Accounting expert witnesses within Australia are bound by APES 215 and any applicable court practice notes.  Both the standard and practice notes convey the independence and objectivity of the expert is of utmost importance.

On 1 April 2014, a revised issue of the standard was released and implement.  Paragraph 1.2 of APES 215 (page 3) states that ‘APES 215 sets the standards for Members in the provision of quality and ethical Forensic Accounting Services’.  A concern regarding the challenge to accountants to keep up with the changes of the standard has been raised.  In my opinion, it is within the best interest of accountants to maintain awareness of any standard revisions in order to preserve credibility in court.

References

Accounting Professional and Ethical Standards Board. (2013). APES 215 Forensic Accounting Services.  Retrieved from http://www.apesb.org.au/

Shields, A. (2010).  The Role of Forensic Accountants.  Retrieved from http://www.dolmanbateman.com.au/1323/the-role-of-forensic-accountants/

  

Van Akkeren, J., Buckby, S., & MacKenzie, K. (2013). A metamorphosis of the traditional accountant. Pacific Accounting Review, 25(2), 188-216, DOI: 10.1108/PAR-06-2012-0023

Is the Importance of Information Security Over Exaggerated?

Many businesses fail to recognise fraud, bribery and corruption as a serious threat to the viability of the business mainly due to readily available security software.  Trust is placed in virus protection, security software and the like; however the necessity for information security is essentially ignored.

Information security ensures that information is protected against disclosure to unauthroised users, improper modification and non-access when required (ISACA, 2012, p. 14).  At my current place of employment, a mid-tier accounting firm, access is restricted to client files which relate to a directors entity.  This practice is to manage the risk of internal misappropriation of information.

Essentially, information security encompasses the protection against both internal and external fraud, corruption and bribery risks.  The number of respondents to the Computer Crime & Security Survey who reported a breach of security decreased from 90 per cent in 2003 to 45.6 per cent in 2011 (Silic & Back, 2014, p. 279).  Although this demonstrates businesses actively sought to target the risk of security breaches, technology is ever changing.  It is within the best interest of businesses to constantly evolve their information security in order to manage the risk of fraud, bribery and corruption.

References 

ISACA (2012).  Cobit 5 for Information Security.  Retrieved from http://www.isaca.org/COBIT/Documents/COBIT-5-for-Information-Security-Introduction.pdf

  

Silic, M., & Back, A.  Information security: Critical review and future directions for research. Information Management & Computer Security, 22(3), 279 – 308, DOI: 10.1108/IMCS-05-2013-0041

Importance of Management and Governance Separation

Since the rise of the digital era, it has become imperative to manage the risk of fraud, corruption and bribery in the workplace.  Many companies are oblivious to the risk and as a result their capacity to absorb the aftermath is substantially lower than ideal.

I recall Flexcoin, an online business serving bitcoin traders and investors, was hacked in March 2014 and was immediately forced to stop trading as a result (Bitcoin bank Flexcoin shuts after theft, 2014).  Although this was not internal corruption, the case demonstrates the vulnerability of companies who are not equipped to manage the risk of fraud, corruption and bribery.

Specifically, in relation to internal risk of fraud, corruption and bribery, the COBIT 5 framework’s fifth principle explicitly addresses the importance of separating governance from management (Oliver & Lainhart, 2012, p. 9).

The principle forms a line between setting objectives and measuring outcomes.  Should a company disregard the essential separation of governance and management, they are ultimately risking the continuity of the company by allowing the level of vulnerability to increase significantly.

Through the implementation of COBIT 5, I believe a company can manage the risks present in the digital era and, most importantly, build a strong governance/management distinction to manage the risk of fraud, corruption and bribery in the workplace.

References

Bitcoin bank Flexcoin shuts after theft (2014, March 4). AFP.  Retrieved from https://au.finance.yahoo.com

Oliver, D., & Lainhart, J. (2012). COBIT 5: Adding Value Through Effective Geit.  EDPACS, 46:3, 1-12, DOI: 10.1080/07366981.2012.706472